Correlation Between Coterra Energy and Golar LNG

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Can any of the company-specific risk be diversified away by investing in both Coterra Energy and Golar LNG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Coterra Energy and Golar LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coterra Energy and Golar LNG Limited, you can compare the effects of market volatilities on Coterra Energy and Golar LNG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Coterra Energy with a short position of Golar LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coterra Energy and Golar LNG.

Diversification Opportunities for Coterra Energy and Golar LNG

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Coterra and Golar is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and Golar LNG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golar LNG Limited and Coterra Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Coterra Energy are associated (or correlated) with Golar LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golar LNG Limited has no effect on the direction of Coterra Energy i.e., Coterra Energy and Golar LNG go up and down completely randomly.

Pair Corralation between Coterra Energy and Golar LNG

Given the investment horizon of 90 days Coterra Energy is expected to generate 1.22 times less return on investment than Golar LNG. In addition to that, Coterra Energy is 1.53 times more volatile than Golar LNG Limited. It trades about 0.11 of its total potential returns per unit of risk. Golar LNG Limited is currently generating about 0.21 per unit of volatility. If you would invest  2,485  in Golar LNG Limited on February 13, 2024 and sell it today you would earn a total of  104.00  from holding Golar LNG Limited or generate 4.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Coterra Energy  vs.  Golar LNG Limited

 Performance 
       Timeline  
Coterra Energy 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Coterra Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coterra Energy sustained solid returns over the last few months and may actually be approaching a breakup point.
Golar LNG Limited 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Golar LNG Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Golar LNG reported solid returns over the last few months and may actually be approaching a breakup point.

Coterra Energy and Golar LNG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coterra Energy and Golar LNG

The main advantage of trading using opposite Coterra Energy and Golar LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coterra Energy position performs unexpectedly, Golar LNG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Golar LNG will offset losses from the drop in Golar LNG's long position.
The idea behind Coterra Energy and Golar LNG Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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